San Francisco Ducks Challenge Over Lifetime Tenant Law

SAN FRANCISCO (CN) – A federal judge ruled Monday that an Ohio couple cannot pursue claims that a San Francisco city ordinance left them stuck with a lifetime tenant.

Peyman Pakdel and Sima Chegini bought a tenancy-in-common interest in a six-unit building in San Francisco’s Russian Hill neighborhood in 2009. The TIC agreement they signed with the other owners obligate them to take all necessary steps to convert the building to condominiums.

Converting a property from tenancy-in-common – where several people buy a building and live in separate units – to a condominium, where each person owns his or her own piece of the building, is a notoriously lengthy and expensive process in San Francisco, due to a lottery process that allows only 200 units to be converted citywide each year.

Pakdel and Chegini have had a tenant in their unit since 2010, but planned to move in once they’ve retired.

The city of San Francisco upended their plans in 2013 by passing ordinance 0117-13. While the law put a 10-year halt on the city’s unpopular condo conversion lottery and allowed about 2,200 tenancy-in-common owners to convert their interests into condos under an “Expedited Conversion Program,” it also gives tenants the right to take a lifetime lease for the unit they rent. Pakdel’s and Chegini’s tenant took that deal in May 2017, after their condo conversion went through.

At a hearing last week, their attorney Paul Utrecht argued the law is an unconstitutional taking of the couple’s property, and that the lifetime lease offer requirement is a violation of their right to privacy in the use of their own home.

Seeborg rejected that argument Monday, ruling the couple doesn’t belong to a protected class under the under the 14th Amendment’s Equal Protection Clause, and that their privacy argument is “unavailing for the principal reason that plaintiffs have already in some sense opened their home to the possession and use by their existing tenant.”

The lifetime lease requirement also fails to qualify as an unreasonable seizure of the couple’s property, Seeborg wrote, because the city didn’t force them to convert their TIC to a condo. Rather, it was a choice the couple made when they signed the TIC agreement with their co-owners.

“Although events outside of their control may have frustrated plaintiffs’ expectations with respect to future use of the unit they purchased in 2009, they fail to identify any basis for alleging that the city was responsible for coercing them into doing anything,” Seeborg wrote.

At a hearing last Tuesday on San Francisco’s motion to dismiss the case, Seeborg said it wasn’t up to him to decide whether the ordinance was a good idea.

In granting the city’s motion, Seeborg reiterated that point.

“Mindful that permitting large-scale conversion of apartments into condominiums could result in widespread displacement of existing tenants, the ordinance sought to balance this impact by requiring that applicants for the Expedited Conversion Program offer existing tenants a lifetime lease. This requirement is not applied to TIC owners without existing tenants because conversion of their units to condominiums is not projected to result in displacement,” he said. “While reasonable minds may question the Board of Supervisors’ reasoning in making this distinction, plaintiffs have alleged no facts warranting a second-guess of that legislative decision.”

Seeborg also dismissed the couple’s takings claim as unsuitable for federal court, as Pakdel and Chegini failed to first bring an action against the city in state court.

“Because plaintiffs have not sought compensation for the alleged taking of their property through a state court inverse condemnation proceeding, they have not exhausted state remedies and their takings claims must be dismissed, without prejudice,” Seeborg wrote, noting the the landlords are free to pursue an action in state court.